Udate: SAP says strong Euro hit profit growth

German software maker SAP said a stronger Euro significantly slowed the growth of its revenue and profits during the third quarter.

Sumner Lemon, IDG News Service
October 18, 2007

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German software maker SAP said a stronger Euro significantly slowed the growth of its revenue and profits during the third quarter.

SAP reported third-quarter revenue of €2.4bn (£1.67bn to 30 September), up 9% over the same period last year. The company's net profit during the third quarter hit €408m, up 10% on the same period last year.

Revenue from new software licenses in the quarter was €715m, up 11% from the same quarter last year, or an increase of 15%at constant currencies, SAP said.

Revenue from software and software related services, which includes maintenance revenue, was €1.74bn, up 13% from the year before, or 16% at constant currencies.

SAP said its results could have been stronger, but were held back by the stronger Euro. Over the last year, the Euro has risen 13% year on year against the US dollar.

The Euro also rose substantially against the Japanese yen, rising from an exchange rate of ¥150 to ¥164 during the same period.

Excluding the impact of the stronger Euro, SAP said its revenue growth would have been four percentage points higher using constant currencies, while the increase in operating profit -- a number that excludes non-operating income and taxes used to calculate net profit -- would have been five percentage points higher, reaching 14% instead of 9%.

Despite the hit from currency exchange rates, SAP executives were bullish on the third-quarter results and said the company remains on track to post revenue growth of up to 14%, in constant currencies, for the full year, compared to growth of 12% last year.

The growth rate from new software licenses was slower than in SAP's second quarter, when new license sales increased 18%. It was also slower than Oracle's growth from applications for its latest quarter, reported in September, when new license revenue jumped 65%, helped by Oracle's acquisitions.

SAP's growth was sluggish in Germany and the US, where revenue grew only 4%, but stronger in the rest of Europe and the Americas. Asia-Pacific growth was 20%, excluding Japan, but sales in Japan grew just 3%.

SAP signed a global enterprise agreement during the quarter to provide software for Apple. Such contracts typically run for five years and generate about €100m in revenue for SAP, said a spokesman. SAP has only eight contracts of this kind, including those with Nestle SA and Unilever.

The results come at a time of intense competition between SAP and Oracle. Oracle has sued SAP for allegedly stealing software and other copyright material, and the companies have announced big acquisitions that take them deeper into each other's turf.

SAP said last week it would buy business intelligence vendor Business Objects

for £3.3bn, while Oracle has offered $6.7 billion to buy middleware vendor BEA Systems, although BEA has said the offer is too low.